Florida Franchisee Protection Bill Passes First Hurdle

Under intense opposition from the International Franchise Association, Florida's franchisee protection bill just passed its first hurdle. Senate Bill 750, the Protect Florida Small Business Act, passed the Regulated Industries committee of the Florida Senate.

Sponsored by state senator Jack Latvala (R-16) and representative Jason Brodeur (R-28), the Protect Florida Small Business Act, Senate Bill 750 aims to protect Florida franchise owners from capricious closings of their franchised businesses. Franchisors currently do not need to provide cause or even warning to terminate a franchise in Florida. There are other termination issues as well. When a franchise owner dies, the business can be blocked from being passed on to posterity. Or, if they become ill, their franchise can be forfeited.

For example, a couple owned a company together. They opened a franchise in the Tampa area in 2011 and operated it. When the female partner, the first signatory on the franchise contract, suffered a health problem, her husband simply expanded his duties. After all, companies can and do use partners and staff to perform business duties. However, the national franchisor only recognized the woman, not her company nor her husband, who was only a secondary signatory on the franchise agreement. Nor would they allow her to update the contract to shift up her husband to be the first signatory. Instead, the out-of-state franchisor issued an order to shutter her Tampa business since the franchise in their eyes had been abandoned.

The bad news is that she and her husband lost the franchise and incurred a boatload of costs and liabilities from its closing. And Florida lost a job-creating business.

The good news for the couple is that the woman recovered her health.

This troubling franchise story is but one of many in Florida.

Enter Senate Bill 750.

The first stop for the Florida bill was the Regulated Industries committee on April 4. That committee is dominated by Republican senators – seven Republicans to four Democrats.

CFA supports, IFA opposes

Franchisees, franchisee association leaders and franchisor advocates were all present.

The International Franchise Association, a group formed in 1960 by franchisors who banded together to stop such franchisee protection bills, strongly opposed the measure. On the other side, the Coalition of Franchisee Associations, which was founded in 2007 by franchise owners from some of the country's largest franchise brands, supported the small business protection bill.

In the end the bill passed with seven ayes to two nays.

Regarding the passage of the bill in its first committee hearing, the International Franchise Association's Matt Haller, senior vice president of communications and public affairs, said that his organization and its members had stressed to committee senators how the bill would harm franchising in Florida. Franchisors would sell elsewhere. Moreover, he asserted that the government does not need to insert itself into a private contract between two parties.

But not all senators were buying that.

"Florida is a very desirable place for any national company in our country," testified Senator Latvala (R-16) to the committee. "The thought that they [franchisors] are going to do less business here because of something we do to tighten up around the edges is just fake news so to speak."

Haller opined that some of the Florida senators were confused. "Even the bill's sponsor [Sen. Jack Latvala] seemed confused about the impact of the legislation when he had to break from the hearing to ask questions of a hired lobbyist about how to respond to a question from Senators on the panel," said the IFA vice president.

Supporters of the bill say that the law would grow the number of franchise owners in the Sunshine State by giving buyers more confidence that they can hold onto their franchise investment.

Keith Miller, himself a multi-unit franchisee of a sandwich shop chain and chairman of the Coalition of Franchisee Associations, applauded the senate's Regulated Industries committee and Senator Latvala for championing this important legislation to protect small businesses across Florida. "Local businesses owned and operated as franchises are a staple of Florida's economy, adding $35 billion per year and providing jobs for over 400,000 individuals. Even though they invest hard-earned personal resources to build successful local businesses, franchise owners too often are at the mercy of out-of-state corporations that have unchecked power to choose not to extend or renew their operating agreements."

"This is a monumental first step toward Florida joining 22 other states that have enacted similar protections for franchise owners in the restaurant, convenience store, hotel and retail industries," said Miller. "We look forward to working with the bill's sponsors and other legislators to pass this crucial bill into law and protect Florida's small business owners."

The bill will now pass on to the senate's Judiciary and then eventually its Rules committees for a vote.

The International Franchise Association predicts the bill will fail. "IFA is confident the legislature will reject this legislation, given it would be a step backward for the traditionally pro-business Sunshine State," states its senior vice president.